In regulating Internet, hands-off approach wins, so far

Imagine turning on your television and sampling a wide array of noncommercial cultural, educational, and entertainment programming spanning the dial. Or how about always having a choice of two, three, or even four cable companies to turn to when yours jacks up its monthly rates?

Sound improbable? Maybe. But both could have become reality if several key votes in Congress at the formative stages of both the broadcast and cable industries had gone a different way.

Now with the still-developing Internet driving what some believe is the biggest communications revolution since Gutenberg, a pitched battle is under way in Washington over the rules that will guide the future of cyberspace.

Questions range from fairly straightforward - should cable companies be required to offer consumers more than one Internet service provider - to larger ideological ones, like whether the Internet should be regulated at all.

Everyone involved recognizes the outcome of these debates will ripple well into the future. But with cyberspace still a wild frontier with its roads under construction, many are discovering the old assumptions don't always apply.

"This is, to a great extent, a whole new ballgame - we have to start again from ground zero," says Robert Thompson, professor of film and television at Syracuse University in New York.

The proposed merger between the "old media" giant Time Warner and the "new media" cyberking America Online (AOL) is bringing a new sense of urgency to the debate. Advocates of regulation point to the new company's extraordinary size and reach as a clear indication that government should be on alert to be sure the Internet remains competitive. Opponents contend it's proof the free market is working overtime to bring consumers the best possible services.

The chairman of the Federal Communications Commission (FCC), William Kennard, has favored a "hands-off" approach and last week's stunning merger announcement did nothing to change that. He issued no statements and his staff, when asked about it, simply pointed to a speech he made in December.

"Unless a compelling case can be made for government action - a failure of the market to maximize consumer welfare - then we should give the marketplace a chance to work," Chairman Kennard said.

But critics worry that in today's highly concentrated media marketplace, the free market could end up choking off competition. For instance, right now cable companies own the broadband wires that come into consumers' homes. Those wires are expected to be a primary pipeline for high-speed Internet access. That's what prompted phone giant AT&amp;T to buy TCI and MediaOne, two of the largest US cable companies. And it was behind the AOL-Time-Warner deal.

Initially, AT&amp;T said its cable customers could access only one Internet service provider, Excite@Home, in which it owned a hefty stake. AT&amp;T's stance infuriated other high-tech companies, particularly AOL. It was at the forefront of national lobby calling on the FCC to ensure what's come to be called "open access." Such a policy would require cable companies and others to give consumers a choice of service providers.

But once AOL hooked up with Time Warner, which has 13 million cable subscribers, AOL chairman Steve Case backed away from his more aggressive approach. He now says it should be up to the free market, not the FCC, to ensure open access. And both AT&amp;T and AOL Time Warner now say they favor the concept. Free-market advocates call that a coup for the "hands off" approach. But such assurances don't assuage the critics.

"This doesn't bode well for real competition," says Jeff Chester of the Center for Media Education in Washington.

He and other critics believe it's important now, while the nation's high-speed infrastructure is still under construction, that the government set down a few clear rules to guarantee that consumers have lots of choice and the ability to roam freely over the Internet.

"How the legal structure is put together which sets out the rules is going to be very important," says Mr. Thompson. "Sheer laissez faire isn't going to do it alone."

But Thompson says many of the old notions about concentrations of power are being transformed by high tech, which allows for highly efficient target marketing. "In this strange 21st-century irony, you could have CBS Viacom, this huge statue to commercial culture, offering a 24-hour anarchy channel ... because you've got a market."

Advocates of the free-market approach also contend that things are moving so fast in the development of the high-speed connections that by the time regulators make a decision, technology could already outpace it.

"It takes them six months to study something and another six months to make a decision. By then, they'll be four months behind," says Mark Phigler of Americans for Competitive Telecommunications in Walnut Creek, Calif.

Other experts don't believe the government will make any attempt to regulate the Internet on anything other than standard antitrust grounds. But they believe there's a role for it.

"What the government can do is encourage people and schools to have access to the Web itself - one part of it will always be an avenue for people to connect with each other and trade ideas," says Joseph Turow of the University of Pennsylvania's Annenberg School for Communication. "But I think it's clear that corporate forces are moving quickly to be the highest-profile players on the Web."